Piedmont hotels is an all-equity company. its stock has a beta of 1.15. the market risk premium is 6.5 percent and the risk-free rate is 2.3 percent. the company is considering a project that it considers riskier than its current operations so it wants to apply an adjustment of 1.5 percent to the project's discount rate. what should the firm set as the required rate of return for the project?

Risk-free rate (Rf) = 2.3%

Beta (β) = 1.15

Market risk premium = 6.5%

ER = Rf + β(Market risk-premium)

ER = 2.3 + 1.15(6.5)

ER = 2.3 + 7.475

ER = 9.775%

The required rate of return for the project

= 9.775 + 1.5

= 11.275%

Explanation:

In this case, we need to calculate the expected return based on capital asset pricing model. Then, we will add the risk-adjustment of 1.5% to the expected return obtained from capital asset pricing model.

month 1 start amount =$3287.90 interest=(3287.90x0.0145/12)3.97 total to pay=$3291.81 paid =$1200 balance =$2,091.87

month 2 starting amount= $2,091.87 interest =$25.28 total to pay =$2117.15 paid =$1200 balance $917.15

month 3 starting amount =$917.15 interest =$11.08 total to pay =$928.23 paid =$928.23 balance =$0 total to pay 1200+1200+928.23 = $3328.23 it will take 3 months to pay a total of $3328.23

whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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